It's officially tax season. Attempt to control your glee.
But seriously: Monday, Jan. 27, 2025, was the first day that the Internal Revenue Service started accepting and processing 2024 income tax returns.
The deadline to file is Tuesday, April 15, 2025, which we all know is when you're actually going to file (join the club!)
Homeowners have a lot of tax implications to consider—and for those who own places with homeowners association fees, it can get even more complicated. It's time to get real about how your real estate choices will affect your tax return.
Are HOA fees tax deductible?
HOA fees are used to maintain and improve the community and can include payments for maintenance of common areas, landscaping, insurance, amenities, reserve funds, and repairs.
So are these HOA fees deductible on taxes? It depends.
If you buy a property as your primary residence and are responsible for paying HOA fees on a monthly, quarterly, or yearly basis, those fees are not tax deductible.
"However, if you use part or all of the home for business purposes such as a rental or a home office, you may be able to deduct some or all of the HOA fees," says tax attorney John Georvasilis, of Seattle Legal Services in Seattle.
These exceptions are explained further below.
Can I write off HOA fees when working from home?
If you decide to take a home office deduction and are self-employed, a portion of your HOA can be considered tax deductible on a prorated basis.
"The most common way to prorate the HOA dues would be to add up your total HOA dues for the year and multiply that amount by the square footage of your home office over the total square footage of your home," says Logan Allec, CPA and owner of Choice Tax Relief in Los Angeles.
If your home office occupies 20% of your home, you might be eligible to deduct 20% of your HOA fees.
Just make sure you meet IRS requirements, such as using the home office exclusively for work.
Can I write off HOA fees on a rental property?
If you own a rental property and lease it to a tenant, you can deduct your HOA fees.
"The HOA fees are an ordinary and necessary expense to generate your rental income," says Allec.
If you rent out a portion of the home, just a portion of the fees are deductible.
"For instance, if you rent out a single bedroom, you can write off a portion of the HOA fees based on the square footage of that room compared to the rest of your home," says Georvasilis.
Can I write off HOA fees for a home I rent out part-time?
According to the IRS, a house is considered a second home and not a rental property if you use it for personal purposes during the tax year for a number of days "that’s more than the greater of 14 days, or 10% of the total days you rent it to others at a fair rental price."
So if you rent out the property for 200 days in a year, 10% of that is 20 days. If you use the property for more than 20 days for personal purposes, the IRS considers it a second home and not a rental.
In that case, "you don't report any of the rental income and do not deduct any of the rental expenses, including HOA dues—because they're not tax deductible," says Allec.
But if you didn't use the home for personal purposes for a number of days that was more than the greater of 14 days, or 10% of the total days you rent it to others at a fair rental price—a portion of the HOA dues will be tax deductible.
For instance, if you rented out the property 75% of the year, you can deduct 75% of your HOA fees on your tax return as a rental expense.
Are special assessments tax deductible?
A special assessment is an additional fee that an HOA may impose to cover unforeseen expenses. Unlike regular HOA dues, special assessments are typically only applied in emergency situations.
If the special assessment is used for repairs or maintenance, it is normally tax deductible.
But if it is used for improvements, it is not tax deductible.
Do HOA fees and special assessments impact capital gains taxes when I sell my house?
Monthly HOA fees do not impact capital gains taxes, but special assessments might, according to Allec.
When you sell your property, you could be subject to capital gains tax on any profit from the sale.
Keeping a record of special assessments that were used for improvements to your property "could increase your cost basis in your home, which could decrease your capital gains tax when you sell it," says Allec.
How do I deduct HOA fees or special assessments?
To write off your HOA fees or special assessments on your taxes, it's important to ensure that you comply with IRS regulations.
To deduct HOA fees on a home office, "use Form 8829 to calculate your home office deduction, including the portion of your deduction for HOA fees, and report your total home office deduction at the bottom of Schedule C," advises Allec.
More details about the home office deduction can be found in IRS Publication 587.
To take a tax deduction on a rental property, use Part 1 of Schedule E to list your rental income and expenses.
If you rent your second home part-time, review IRS Publication 527 and then consult a tax advisor.
It’s important for homeowners to speak with a tax professional to gain a clear understanding of HOA fee deductions and their potential impact.
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